EXHIBIT 4.1
STOCK PURCHASE AGREEMENT
AGREEMENT, made as of January 30, 1997, between DIAMETRICS MEDICAL, INC. a
Minnesota corporation (the "Company") and the purchasers (the "Purchasers")
listed on Schedule A hereto.
WHEREAS, the Company wishes to raise additional capital; and
WHEREAS, the Company does not yet have sufficient authorized shares of its
$.01 par value common stock ("Common Stock") for purposes of a private placement
of 3,000,000 shares of its Common Stock; and
WHEREAS, the Company does have 5,000,000 authorized shares of undesignated
preferred stock; and
WHEREAS, the Company will call a special shareholders meeting to approve an
increase in its authorized Common Stock; and
WHEREAS, the Purchasers desire to purchase shares of a series of the
Company's preferred stock (the "Preferred Stock") that will be convertible into
Common Stock upon approval by shareholders of an increase in the authorized
Common Stock together with detachable warrants to purchase additional shares of
Common Stock.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Purchase of Preferred Stock. The Purchasers hereby agree to purchase
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from the Company and the Company hereby agrees to sell to Purchasers the number
of shares of Preferred Stock (the "Preferred Stock") set forth opposite the name
of each Purchaser in Schedule A at a purchase price equal to $16.00 per share,
together with a detachable warrant in the form attached hereto as Exhibit I (the
"Warrant"). Each Warrant will (subject to adjustment) have an exercise price
equal to $5.0625 per share, and will be exercisable (subject to adjustment) into
a number of shares of Common Stock equal to 1/4 of the number of shares of
Common Stock into which the shares of Preferred Stock are initially convertible.
Pursuant to the terms of this Agreement, Additional Warrants (as hereinafter
defined) may be issued. Each share of Preferred Stock shall be convertible into
four shares of the Company's Common Stock upon approval of an increase in the
authorized number of shares of Common Stock at the special shareholders meeting
referred to in Article 7, and shall contain the terms and conditions as
specified in Exhibit II. The Purchasers will receive certain registration rights
with respect to the shares of Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants and Additional Warrants, if any,
pursuant to an agreement in substantially the form attached hereto as Exhibit
III (the "Registration Rights Agreement").
2. Closing Date. The closing of the purchase and sale of the Preferred
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Stock hereunder (the "Closing") will be held at the offices of Xxxxxx & Xxxxxxx
LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 at such time and date
as the Company and the Purchasers may agree (the "Closing Date").
3. Delivery. At the Closing, the Company will deliver to each Purchaser
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a certificate dated the Closing Date registered in such Purchaser's name
representing the Preferred Stock purchased by such Purchaser, together with a
Warrant registered in such Purchaser's name representing the number of shares of
Common Stock purchasable upon the exercise of such Warrant. At the Closing each
Purchaser will pay to the Company the amount of the purchase price set forth
opposite the name of such Purchaser in Schedule A attached hereto by certified
check, wire transfer or any combination of the above.
4. Representations and Warranties of the Company. The Company hereby
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makes the following representations and warranties to the Purchasers which
representations and warranties survive the purchase of the Preferred Stock and
Warrants by the Purchasers:
4.1 Corporate Existence and Power. The Company is duly incorporated,
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validly existing and in good standing under the laws of the State of Minnesota.
The Company's only subsidiary is Diametrics Medical, Ltd., a private limited
company incorporated in England and Wales (the "Subsidiary") and, other than in
the ordinary course of business and with respect to the Subsidiary, has made no
investment in any Person. Each of the Company and the Subsidiary has all
corporate powers and authority and all governmental licenses, authorizations,
consents and approvals (collectively, the "Permits") required to carry on its
business as now conducted, except where the failure to obtain such Permits,
individually or in the aggregate, would not have a Material Adverse Effect (as
defined below) on the Company. Each of the Company and the Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect. The Company has made
available to Purchasers, if requested by Purchasers, true and complete copies of
the Company's articles of incorporation and bylaws as currently in effect. For
purposes of this Agreement, a "Material Adverse Effect" means, with respect to
any Person, a material adverse effect, on the condition (financial or
otherwise), business, assets or properties of such Person and its subsidiaries
taken as a whole or on the ability of such Person to perform its obligations
hereunder. For purposes of this Agreement, any reference to any event, change or
effect being "material" with respect to any Person means an event, change or
effect, whether existing or prospective, which is material in relation to the
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condition (financial or otherwise), business, assets or properties of such
Person and its subsidiaries taken as a whole or on the ability of such Person to
perform its obligations hereunder. For the purposes of this Agreement, "Person"
means any individual, partnership, firm, corporation, limited liability company
or partnership, association, trust, unincorporated organization or other entity,
as well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
4.2 Corporate Authorization. The execution, delivery and performance by
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the Company of this Agreement, the Warrants, and the Registration Rights
Agreement and the consummation by the Company of the transactions contemplated
hereby and thereby are within the Company's corporate powers and, except for any
required approval by the Company's stockholders in connection with the
authorization of additional shares of Common Stock necessary to permit the
conversion of the Preferred Stock, have been duly authorized by all necessary
corporate action. Each of this Agreement, the Warrants and the Registration
Rights Agreement constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms except as such
enforcement may be subject to (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (b) general principles of equity (whether
considered in a proceeding in equity or at law) and, (c) insofar as they relate
to indemnification provisions, the effect of federal and state securities laws
and public policy relating thereto.
4.3 Consents; Approvals. The execution, delivery and performance by the
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Company of this Agreement, the Warrants and the Registration Rights Agreement
and consummation of the transactions contemplated hereby and thereby by the
Company require no action, by or in respect of, notices to, or filing with, any
governmental body, agency, official or authority or any third party, other than
those that have been or will be taken or made in a timely manner.
4.4 Non-Contravention. The execution, delivery and performance by the
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Company of this Agreement, the Warrants and the Registration Rights Agreement
and the consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (except in the case of clauses (b), (c) and (d) of
this Section 4.4, for any such matters that, individually or in the aggregate,
have not had, and will not have, a Material Adverse Effect on the Company) (a)
contravene or conflict with the articles of incorporation or bylaws of the
Company, (b) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to the Company or any of its properties or assets, (c)
constitute a default under or give rise to a right of termination, cancellation,
restriction or acceleration of any right or obligation of the Company or to a
loss of any benefit to which the Company is entitled under any provision of any
agreement, contract or other instrument binding upon or
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applicable to the Company or any of its properties or assets or any license,
franchise, permit or other similar authorization held by or applicable to the
Company, or (d) result in the creation or imposition of any Lien on any asset of
the Company. For purposes of this Agreement, "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.
4.5 Capitalization. The authorized capital stock of the Company consists
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of 20,000,000 shares of Common Stock and 5,000,000 shares of preferred stock,
par value $0.01 per share (the "Preferred Stock"). As of the date hereof (i)
15,210,614 shares of Common Stock are issued and outstanding and (ii) no shares
of Preferred Stock are issued and outstanding. As of the date hereof 2,431,570
shares of Common Stock are reserved for issuance pursuant to the exercise of
outstanding stock options and 786,814 shares of Common Stock are reserved for
issuance pursuant to the exercise of outstanding warrants. All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, are free from preemptive rights and
were issued in compliance with all state and federal securities laws. Assuming
in each case proper payment is made therefor, each share of Preferred Stock
issued to the Purchasers pursuant hereto and each share of Additional Preferred
Stock (as hereinafter defined), if any, will be, and upon the conversion of the
Preferred Stock, the Additional Preferred Stock, if any, and/or exercise of the
Warrants, each share of Common Stock issued in respect thereof will be, duly
authorized, validly issued and outstanding, fully paid and nonassessable, free
from preemptive rights and issued in compliance with all state and federal
securities laws. Except as set forth in this Section, there are outstanding (a)
no other shares of capital stock or other voting securities of the Company, (b)
no securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company, and (c) no other options or
other rights to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items in
clauses (a), (b) and (c) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of the Company to repurchase,
redeem or otherwise acquire any Company Securities.
4.6 SEC Filings.
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(a) The Company has filed all required reports, schedules, forms,
statements and other documents filed or required to be filed by the Company
with the Securities and Exchange Commission (the "SEC") since January 1,
1995. The Company has delivered to Purchasers (i) the annual reports on
Form 10-K for its fiscal year ended 1995 (ii) its quarterly report on Form
10-Q for its fiscal quarter ended September 30, 1996, (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the
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stockholders of the Company held since January 1, 1996, and (iv) all of its
other reports, statements, schedules and registration statements filed by
the Company with the SEC since January 1, 1996 (collectively, "SEC
Reports").
(b) Except to the extent that information contained in any SEC
Report has been revised or superseded by a later-filed SEC Report, filed
and publicly available prior to the date of this Agreement, as of the date
of this Agreement, none of the SEC Reports contains any untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the SEC Reports complied as to form in all material
respects with the requirements of the Securities Act of 1933, as amended,
(the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
SEC Reports.
4.7 Financial Statements.
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(a) Except to the extent that information contained in any SEC
Report has been revised or superseded by a later-filed SEC Report, filed
and publicly available prior to the date of this Agreement, the audited
financial statements and unaudited interim financial statements of the
Company included in its annual reports on Form 10-K and the quarterly
reports on Form 10-Q referred to in Section 4.6 are true and correct and
fairly present, in conformity with generally accepted accounting
principles, applied on a consistent basis (except as may be indicated in
the notes thereto), the financial position of the Company as of the dates
thereof and results of operations and changes in financial position for the
periods then ended (subject to non-material normal year-end adjustments in
the case of any unaudited interim financial statements). For purposes of
this Agreement "Balance Sheet" means the Company's balance sheet as of
September 30, 1996, including the notes thereto, as set forth in the
Company's 10-Q referred to in Section 4.6 and "Balance Sheet Date" means
the date of the Balance Sheet.
(b) Except and to the extent set forth in the Balance Sheet, the
Company does not have any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise), except for liabilities and
obligations incurred after the Balance Sheet Date in the ordinary course of
business which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
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4.8 Disclosure Documents.
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(a) Each document required to be filed by the Company with the SEC
in connection with the transactions contemplated by this Agreement (the
"Company Disclosure Documents"), will, when filed, comply as to form in all
material respects with the applicable requirements of the Exchange Act.
(b) The Company Disclosure Documents will not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 4.8 will not apply
to statements or omissions included in the Company Disclosure Documents
based upon information furnished to the Company in writing by Purchasers
specifically for use therein.
4.9 Intellectual Property. Each of the Company and the Subsidiary owns
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or has the right to use (without material payment) the Intellectual Property (as
defined below) as is necessary or appropriate for the conduct of its business as
it is now being conducted, as it is anticipated to be conducted and with respect
to the transactions contemplated by this Agreement (collectively, the "Company
Intellectual Property"). To the Company's knowledge after due inquiry, no
infringement or unauthorized use by the Company or the Subsidiary of any
Intellectual Property of any third party exists, has occurred or is threatened.
Other than as disclosed in the Company's reports or statements previously filed
pursuant to the Exchange Act, no current or former shareholder, officer,
director, consultant, employee or affiliate of the Company or the Subsidiary has
any right, title or interest in any Company Intellectual Property. For the
purposes of this Agreement, "Intellectual Property" means any and all of a
Person's right, title and interest in and to United States and foreign patents,
copyrights, mask works, trade and service names and marks, whether or not
registered, pending, issued or applied for; technical knowledge; works,
processes and designs; hardware; software (in source code and object code form,
including all related annotations and listings); inventions; trade secrets and
other intellectual property rights; all things authored, made for hire,
discovered, developed, designed or acquired by a Person or, to the extent that a
Person has any right, title or interest thereto, any of their respective agents,
contractors and employees in any stage of development, regardless of whether any
or all of the foregoing constitutes copyrightable or patentable subject matter
or is in tangible or intangible form; and all embodiments, expressions,
representations, fruits and products of any of the foregoing.
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4.10 Absence of Certain Changes. Since the Balance Sheet Date, the
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Company has conducted its business in the ordinary course consistent with past
practice and there has not been:
(a) any event, occurrence or development which has had or reasonably
could be expected to have a Material Adverse Effect on the Company; or
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company or any repurchase, redemption or other acquisition by the Company
of any outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company.
4.11 Litigation. There is no action, suit, investigation or proceeding
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(or any basis therefor) pending against or, to the knowledge of the Company,
threatened against or affecting, the Company or the Subsidiary or any of its
properties before any court or arbitrator or any governmental body, agency or
official which, if determined or resolved adversely to the Company or the
Subsidiary, could reasonably be expected to have a Material Adverse Effect on
the Company, nor is there any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against the Company or the Subsidiary having, or which,
insofar as can reasonably be foreseen, may have, any such effect.
4.12 Compliance with Laws and Agreements. Except as disclosed in the SEC
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Reports and except in the case of clauses (b), (c) and (d) for breaches,
violations and defaults which in the aggregate do not, and insofar as reasonably
can be foreseen could not, have a Material Adverse Effect on the Company,
neither the Company nor the Subsidiary is in violation of, nor has it violated,
nor to the best knowledge is it under investigation with respect to, nor has it
received notice or been charged with any violation of, any applicable provisions
of any laws, statutes, ordinances or regulations. Neither the Company nor the
Subsidiary is in breach or violation of or in default in the performance or
observance of any term or provision of, and no event has occurred which, with
lapse of time or action by a third party, could result in a default under, (a)
the articles of incorporation, bylaws or similar governing documents of the
Company or the Subsidiary, (b) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which the Company or the Subsidiary is a party or by which it is
bound or to which any of its property is subject, (c) any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or the
Subsidiary or any of their respective properties or assets, or (d) any
certificate, license, Permit, registration, accreditation or other consent or
approval of governmental agencies or accreditation organizations.
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4.13 Finders' Fees. There is no investment banker, broker, finder or
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other intermediary which has been retained by or is authorized to act on behalf,
of the Company who might be entitled to any fee or commission upon consummation
of the transactions contemplated by this Agreement.
4.14 Full Disclosure; No Misrepresentations. No information contained in
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the representations and warranties of the Company set forth in this Agreement or
in any of the certificates, schedules, lists, documents, exhibits or other
instruments relating hereto or to be delivered to Purchasers hereunder contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statement contained herein or therein, in light of the
circumstances under which they were made, not misleading. To the knowledge of
the Company, there is no fact or condition which has not been heretofore
disclosed to Purchasers in writing which has a Material Adverse Effect on the
Company, or reasonably could be expected to have a Material Adverse Effect on
the Company.
5. Representations and Warranties of the Purchasers. Each Purchaser
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hereby makes the following representations and warranties to the Company which
representations and warranties survive the issuance of the Preferred Stock and
Warrants by the Company:
5.1 Availability of Information. Purchaser has been given access to full
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and complete information regarding the Company (including the opportunity to
meet with officers of the Company and review such documents as it may have
requested in writing) and has utilized such access to its satisfaction for the
purpose of obtaining information.
5.2 Risk of Investment. Purchaser:
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(a) realizes that the purchase of the Preferred Stock and Warrants
represents a speculative investment involving a high degree of
risk;
(b) can bear the economic risk of an investment in the Preferred
Stock and Warrants for an indefinite period of time, can afford
to sustain a complete loss of such investment, has no need for
liquidity in connection with an investment in the Preferred
Stock and Warrants; and can afford to hold the Preferred Stock
and Warrants indefinitely;
(c) realizes that the Preferred Stock and Warrants have not been
registered for sale under the Securities Act or applicable state
securities laws (the "State Laws"), and may be sold only
pursuant
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to registration under the Securities Act and State Laws, or an
opinion of counsel that such registration is not required; and
(d) is experienced and knowledgeable in financial and business
matters, capable of evaluating the merits and risks of investing
in the Preferred Stock and Warrants, and does not need or desire
the assistance of a knowledgeable representative to aid in the
evaluation of such risks.
5.3 Investment Intent.
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(a) Purchaser acknowledges that it has been advised that the
Preferred Stock and Warrants are being offered and sold pursuant
to exemptions from the Securities Act and applicable State Laws,
and the Company's reliance upon such exemptions is predicated in
part on Purchaser's representations contained herein.
(b) The Preferred Stock and Warrants are being purchased for
Purchaser's own account and for investment and without the
current intention of reselling or redistributing the Preferred
Stock.
(c) Purchaser has made no agreement with others regarding any of the
Preferred Stock or Warrants.
(d) Purchaser acknowledges that the shares of Preferred Stock and
the shares of Common Stock into which the Preferred Stock is
convertible are further restricted by a legend placed on the
certificate representing the Preferred Stock and/or Common Stock
containing substantially the following language:
"The securities represented by this certificate have not been
registered under either the Securities Act of 1933 or applicable
state securities laws and may not be sold, transferred,
assigned, offered, pledged or otherwise distributed for value
unless there is an effective registration statement under such
Act and such laws covering such securities, or the Company
receives an opinion of counsel acceptable to the Company stating
that such sale, transfer, assignment, offer, pledge or other
distribution for value is exempt from the registration and
prospectus delivery requirements of such Act and such laws."
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5.4 Residence. The principal office or residence of each Purchaser is
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located at the address set forth in Schedule A.
5.5 Accredited Status . Each Purchaser is an "accredited investor" as
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that term is defined under Regulation D promulgated pursuant to the Securities
Act.
6. Covenant of Purchasers. Each Purchaser agrees that if such Purchaser
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should later desire to dispose of or transfer any of the Preferred Stock or
Warrants in any manner, Purchaser shall not do so without first obtaining (i) an
opinion of counsel satisfactory to the Company that such proposed disposition or
transfer may be made lawfully without the registration of such Preferred Stock
pursuant to the Securities Act and applicable State Laws, or (ii) registration
of such Preferred Stock pursuant to the Securities Act and applicable State
Laws.
7. Affirmative Covenants of the Company. The Company covenants to each
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of the Purchasers as follows:
7.1 Special Shareholder Meeting. The Company will, as soon as reasonable
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and practicable, properly call a special shareholders meeting to approve an
increase in the authorized capital stock of the Company in an amount sufficient
to allow the conversion of all of the shares of Preferred Stock purchased
pursuant to this Agreement and the Additional Preferred Stock, if any, into
shares of Common Stock. The Company shall use its best efforts to cause the
shareholders to approve such increase. Pursuant to the terms specified in
Exhibit II to this Agreement, neither the Preferred Stock nor the Additional
Preferred Stock, if any, shall be convertible into Common Stock unless and until
such approval is obtained. If such approval is not obtained within six months of
the Closing Date, the Company will use its best efforts to seek to have the
shares of Preferred Stock and the Additional Preferred Stock (as hereinafter
defined), if any, listed for inclusion on the automated quotation system of the
National Association of Securities Dealers, Inc. or any national securities
exchange on which a class of the Company's equity securities is listed.
7.2 Additional Warrants. The Company will issue additional warrants (the
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"Additional Warrants") to the Purchasers exercisable for 187,500 shares of
Series I Junior Participating Preferred Stock (the "Additional Preferred Stock")
at a per share purchase price equal to $20.25 in the event that the Company
breaches its obligations set forth in Section 3 of the Registration Rights
Agreement. The Company will take all necessary corporate and other action in
connection with such issuance.
7.3 Reservation of Capital Stock. The Company shall reserve and maintain
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a sufficient number of shares of Common Stock for issuance upon conversion of
all of the outstanding shares of Preferred Stock and Additional
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Preferred Stock, if any, and exercise of all Warrants; provided, however, that
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in the case of the Preferred Stock and the Additional Preferred Stock, if any,
such reservation shall be subject to the approval by the shareholders of the
Company of an increase in the authorized capital stock of the Company in an
amount sufficient to allow the conversion of the Preferred Stock and the
Additional Preferred Stock, if any. The Company shall reserve and maintain a
sufficient number of shares of preferred stock for issuance upon exercise of the
Additional Warrants, if any.
7.4 Additional Covenants. For the period commencing on the Closing Date
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and ending on the later of the conversion of all of the Preferred Stock and the
Additional Preferred Stock, if any, into Common Stock or the date that the
registration statement described in Section 3 of the Registration Rights
Agreement is declared effective by the SEC, the Company covenants to each of the
Purchasers as follows:
(a) The Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful Taxes imposed upon the
income, profits, property, or business of the Company or any of its
subsidiaries; provided, however, that any such Tax need not be paid if the
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validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company or any such subsidiary, as the case may be,
shall have set aside on its books adequate reserves therefor; and provided,
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further, that the Company or any such subsidiary, as the case may be, will
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pay all such Taxes forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor. The
Company will promptly pay or cause to be paid when due, or in conformance
with customary trade terms, all other indebtedness incident to the
operations of the Company or its subsidiaries. For purposes of this
Agreement, "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, goods and services, capital,
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transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property
or other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority;
(b) The Company will keep, and will cause each of its subsidiaries
to keep, its properties in good repair, working order, and condition,
reasonable wear and tear excepted, and from time to time make all necessary
and proper repairs, renewals, replacements, additions, and improvements
thereto; and the Company will at all times, and will cause each of its
subsidiaries to, comply with the provisions of all material leases to which
it is a party or
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under which it occupies property so as to prevent any loss or forfeiture
thereof or thereunder;
(c) The Company will keep, and will cause each of its subsidiaries
to keep, its assets that are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
extended coverage, and explosion insurance in amounts customary for
companies in similar businesses similarly situated; and the Company will
maintain, and will cause each of its subsidiaries to maintain, with
financially sound and reputable insurers, insurance against other hazards,
risks, and liabilities to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated;
(d) The Company will keep, and will cause its subsidiaries to keep,
true records and books of account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business
and affairs in accordance with generally accepted accounting principles;
(e) The Company will comply, and will cause its subsidiaries to
comply, with the requirements of all applicable provisions of any laws,
statutes, ordinances or regulations, a breach of which could have a
Material Adverse Effect;
(f) The Company shall, and shall cause each of its subsidiaries to,
maintain in full force and effect its corporate existence, rights, and
franchises and all licenses and other rights to use patents, processes,
licenses, trademarks, trade names, or copyrights owned or possessed by it
and deemed by the Company to be necessary to the conduct of its business.
(g) The Company shall require all persons now or hereafter employed
by the Company who have access to confidential and proprietary information
of the Company to enter into agreements of confidentiality. The Company
will cause its subsidiaries to use reasonable efforts to require all
persons hereafter employed by such subsidiaries who have access to
confidential and proprietary information of the Company or any such
subsidiary to enter into agreements of confidentiality.
7.5 Purchasers' Rights in Any Future Private Financing. For a period
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commencing on the date of this Agreement and ending on the fifth anniversary of
this Agreement, in the event of any proposed sale of securities of the Company
(including, without limitation, the sale of Common Stock, preferred stock,
convertible securities and debt instruments, other than commercial loans or
extensions of credit made by a bank, insurance company or other third-party
financial institution), other than pursuant to grants of employee stock options,
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warrants in lieu of compensation, performance warrants and similar arrangements
and shares issued upon the exercise of stock options and warrants outstanding as
of the date of this Agreement, each Purchaser shall be provided at least 30
days' advance notice and have the right to invest in such sale of securities, on
the same terms as offered to any third party, in a percentage amount based on
such Purchaser's pro rata investment in the Preferred Stock sold pursuant to
this Agreement; provided, however, that such right does not include any sale of
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the Company's equity securities in connection with a public offering pursuant to
a registration statement filed with the SEC.
7.6 Transfer of Registered Stock. Following effectiveness of a
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registration statement filed with the SEC pursuant to Section 3 of the
Registration Rights Agreement, upon attempted transfer of securities registered
under such registration statement pursuant to the terms of the Registration
Rights Agreement and in accordance with applicable laws, rules and regulations,
the Company will, as promptly as practicable following receipt of all
documentation reasonably requested by the Company from the transferor, take all
action necessary to cause its transfer agent to permit transfer of such
securities without restrictive legend.
8. Conditions to Closing.
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8.1 Conditions to Purchasers' Obligations at the Closing. The
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obligations of each Purchaser to purchase the Preferred Stock at the Closing are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Purchaser who
does not consent in writing thereto:
(a) The representations and warranties made by the Company in
Section 4 hereof shall be true and correct in all material
respects as of the Closing Date with the same force and effect
as if they had been made as of the Closing Date, and the Company
shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the
Closing.
(b) On the Closing Date, the sale and issuance of the Preferred
Stock and Warrants and the proposed issuance of the Company's
Common Stock upon conversion of the Preferred Stock or exercise
of the Warrants shall be legally permitted by all laws and
regulations to which Purchasers and the Company are subject.
(c) The Registration Rights Agreement shall have been executed and
delivered by the parties thereto.
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(d) The Purchasers shall have received on the Closing Date, a
certificate or certificates of the chief executive officer and
the chief financial officer of the Company to the effect that,
as of such Closing Date, each of them severally represents that
the representations and warranties of the Company set forth in
Section 4 of this Agreement are true and correct in all material
respects as of the Closing Date and the Company has performed
all of its obligations under this Agreement to be performed at
or prior to such Closing Date.
(e) The Purchaser shall have received on the Closing Date the
opinion of Xxxxxx & Xxxxxxx LLP, counsel for the Company, dated
the Closing Date substantially in the form attached hereto as
Exhibit IV.
(f) A copy of (i) the Articles of Incorporation, as amended, of the
Company, certified by the secretary of state of Minnesota, as of
a date not earlier than ten (10) business days prior to the
Closing Date and accompanied by a certificate of the Secretary
or Assistant Secretary of the Company, dated as of the Closing
Date, stating that no amendments have been made to such Articles
of Incorporation since the date of the last filing indicated in
the secretary of states' certificate, and (ii) the By-laws of
the Company, certified by the Secretary or Assistant Secretary
of the Company, each of which to be in the form and substance as
previously made available to the Purchasers pursuant to Section
4.1.
(g) Good standing certificates for the Company from the Secretary of
State of Minnesota and the Secretary of State of each
jurisdiction in which it is qualified to do business in each
case dated as of the date not earlier than five (5) business
days prior to the Closing Date.
(h) A certificate signed by a duly authorized officer of the Company
certifying that since the Balance Sheet Date no event or events
has occurred, or is reasonably likely to occur, which,
individually or in the aggregate, has, or could reasonably be
expected to have, a Material Adverse Effect.
(i) Evidence reasonably satisfactory to the Purchasers that the
Certificate of Designation (Exhibit II) has been filed with the
Secretary of State of Minnesota.
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8.2 Conditions to Obligations of the Company. The obligations of
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the Company to each Purchaser under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by each
Purchaser:
(a) The representations and warranties made by the Purchasers in
Section 5 hereof shall be true and correct in all material
respect at the Closing Date with the same force and effect as if
they had been made on and as of said date.
(b) The Purchasers shall have performed and complied with all
agreements and conditions herein required to be performed or
complied with by the Purchasers on or before the Closing.
9. Indemnification of Purchasers.
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9.1 Survival. All agreements, covenants, representations and warranties
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contained herein and made in writing by or on behalf of the parties hereto in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and shall survive until the fifth anniversary of the date of
this Agreement (the "Indemnity Period").
9.2 Purchasers' Right to Indemnification. Subject to the provisions of
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this Section 9, the Company hereby agrees to indemnify and hold harmless
Purchasers, and their respective employees, agents, directors, officers,
successors, predecessors and assigns (collectively, the "Purchaser Indemnified
Parties") from and against (i) any and all losses, obligations, liabilities,
damages, claims, deficiencies, costs and expenses (including, but not limited
to, the amount of any settlement entered into pursuant hereto and all reasonable
legal and other expenses incurred in connection with the investigation,
prosecution or defense of the matter but excluding consequential damages)
(collectively, "Claims"), which may be asserted against or sustained or incurred
by the Purchaser Indemnified Parties in connection with, arising out of, or
relating to (A) any breach or alleged breach of any of the representations,
warranties, agreements and covenants made by the Company herein or in any
certificate or other document delivered to any Purchaser Indemnified Party by or
on behalf of the Company in connection with this Agreement; or (B) any false,
incorrect or misleading representation or warranty made by or on behalf of the
Company herein or in any certificate or other document delivered to any
Purchaser Indemnified Party by or on behalf of the Company in connection with
this Agreement; and (ii) any and all costs and expenses (including, but not
limited to, reasonable legal expenses) incurred by any Purchaser Indemnified
Party in connection with the enforcement of its rights under this Agreement. No
claim for indemnification under Section 9 may be commenced after the Indemnity
Period; provided, however, that claims made within the applicable time period
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shall
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survive to the extent of such claim until such claim is finally determined and,
if applicable, paid. The parties to this Agreement acknowledge that such
indemnification provisions apply only with respect to the Preferred Stock, the
Warrants, the Additional Warrants (if any) and the shares of Common Stock
issuable upon the conversion of the Preferred Stock and/or exercise of the
Warrants and the Additional Warrants, if any, and the shares of Common Stock
issued or issuable as dividends on, or other distributions with respect to the
Preferred Stock, the Warrants, the Additional Warrants (if any) and the shares
of Common Stock issuable upon the conversion of the Preferred Stock and/or
exercise of the Warrants and the Additional Warrants; and any other security
issued or issuable in exchange for, or in replacement of, the Preferred Stock,
the Warrants, the Additional Warrants (if any) and the shares of Common Stock
issuable upon the conversion of the Preferred Stock and/or exercise of the
Warrants and the Additional Warrants.
9.3 Procedure for Claims.
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(a) Notice of Claim. Promptly, but in any event within 10 days
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after obtaining knowledge of any claim or demand which may give rise to, or
could reasonably give rise to, a claim for indemnification hereunder
(referred to herein as an "Indemnification Claim"), a Purchaser shall give
written notice to the Company of such Indemnification Claim ("Notice of
Claim"). A Notice of Claim shall be given with respect to all
Indemnification Claims; provided, however, that the failure to give a
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timely Notice of Claim to the Company shall not relieve the Company from
any liability that it may have to the Purchaser Indemnified Parties
hereunder to the extent that the Company is not prejudiced by such failure.
The Notice of Claim shall set forth the amount (or a reasonable estimate)
of the loss, damage or expense suffered, or which may be suffered, by the
Purchaser Indemnified Party as a result of such Indemnification Claim and
the aggregate amount of all Indemnification Claims to date and a brief
description of the facts giving rise to such Indemnification Claim.
Purchasers shall furnish to the Company such information (in reasonable
detail) as Purchasers may have with respect to such Indemnification Claim
(including copies of any summons, complaint or other pleading which may
have been served on it and any written claim, demand, invoice, billing or
other document evidencing or asserting the same).
(b) Third Party Claims.
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(i) If the claim or demand set forth in the Notice of Claim is
a claim or demand asserted by a third party (a "Third Party Claim"),
the Company shall have fifteen days (or such shorter period (but not
less than ten days) if an answer or other response or filing with
respect to the pleadings served by the third party is required prior
to the fifteenth
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day) after the date of receipt by the Company of the Notice of Claim
(the "Notice Date") to notify Purchasers in writing of the election
by the Company to defend the Third Party Claim on behalf of the
Purchaser Indemnified Parties.
(ii) If the Company elects to defend a Third Party Claim on
behalf of the Purchaser Indemnified Parties, Purchasers shall make
available to the Company and its agents and representatives all
records and other materials in Purchasers' possession which are
reasonably required in the defense of the Third Party Claim and the
Company shall pay any expenses payable in connection with the defense
of the Third Party Claim as they are incurred (whether incurred by
Purchasers or the Company).
(iii) If the Company has assumed control of the defense, the
Company may contest or settle the Third Party Claim on such terms as
the Company may choose, provided, however, that the Company will not
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have the right, without Purchasers' prior written consent, to settle
any such claim if such settlement (i) arises from or is part of any
criminal action, suit or proceeding (ii) contains a stipulation to,
confession of judgment with respect to, or admission or
acknowledgment of, any liability or wrongdoing on the part of any
Purchaser Indemnified Party, (iii) relates to any foreign federal,
state or local tax matters, (iv) provides for injunctive relief, or
other relief other than damages, which is binding on any Purchaser
Indemnified Party, (v) does not fully release all Purchaser
Indemnified Parties with respect to the relevant Third Party Claim or
(vi) has any res judicata or collateral estoppel effect that could be
adverse to any Purchaser Indemnified Party.
(iv) If the Company elects to defend a Third Party Claim, the
Purchaser Indemnified Parties shall have the right to participate in
the defense of the Third Party Claim, at the Purchaser Indemnified
Parties' expense (and without the right to indemnification for such
expense under this Agreement); provided, however, that the reasonable
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fees and expenses of counsel retained by the Purchaser Indemnified
Parties shall be at the expense of the Company if (A) the use of the
counsel chosen by the Company to represent the Purchaser Indemnified
Parties would present such counsel with a conflict of interest; (B)
the parties to such proceeding include both Purchaser Indemnified
Parties and the Company and there may be legal defenses available to
Purchaser Indemnified Parties which are different from or additional
to those available to the Company; (C) within ten days after being
advised by the Company of the identity of counsel to be retained to
represent
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Purchaser Indemnified Parties, Purchasers shall have objected to the
retention of such counsel for valid reasons (which shall be stated in
a written notice to the Company), and the Company shall not have
retained different counsel reasonably satisfactory to Purchasers; or
(iv) the Company shall authorize the Purchaser Indemnified Parties to
retain separate counsel at the expense of the Company.
(v) If the Company elects to defend a Third Party Claim, and
does not defend a Third Party Claim in good faith, the Purchaser
Indemnified Parties shall have the right, in addition to any other
right or remedy it may have hereunder, at the sole and exclusive
expense of the Company, to defend such Third Party Claim; provided,
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however, that such expenses shall be payable by the Company only if
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and when such Third Party Claim becomes payable.
(c) Cooperation in Defense. Purchasers shall cooperate with the
----------------------
Company in the defense of Third Party Claims. Subject to the foregoing, (i)
the Purchaser Indemnified Parties shall not have any obligation to
participate in the defense of or to defend any Third Party Claim and (ii)
the Purchaser Indemnified Parties' defense of or its participation in the
defense of any Third Party Claim shall not in any way diminish or lessen
its right to indemnification as provided in this Agreement.
10. Entire Agreement. This Agreement and the other documents referenced
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herein contain the entire agreement between the parties with respect to the
subject matter hereof and supersede any and all prior arrangements and
understandings, both written and oral, with respect thereto.
11. Severability. It is the desire and intent of the parties that the
------------
provisions of this Agreement be enforced to the fullest extent permissible under
the law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, in the event that any provision of this Agreement would be
held in any jurisdictions to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
12. Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that no party may assign, delegate or otherwise
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transfer any of its rights or obligations under this Agreement without obtaining
the prior written consent of the other party hereto.
13. Governing Law. This Agreement shall be construed in accordance with
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and governed by the law of the State of Minnesota, without giving effect to the
principles of conflict of laws thereof.
14. Counterparts; Effectiveness. This Agreement may be signed in any
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number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereof and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
15. Notice. Whenever a party to this Agreement is required to give
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notice to the other party hereunder at the address set forth in this paragraph,
such notice shall be made in writing and deemed to have been duly delivered when
(a) delivered by hand, (b) one day after upon confirmation of delivery by a
national recognized overnight delivery service, (c) three days after sent by
Certified U.S. Mail, return receipt requested or (d) by telecopy when received.
The address for notices given hereunder shall be: if to a Purchaser, at the
address set forth on Schedule A hereto, and if to the Company, at 0000 Xxxxxx
Xxxx, Xxxxxxxxx, Xxxxxxxxx 00000, Attention: President (telecopy: (612) 639-
8549), or at such other address as the parties designate to each by giving
notice hereunder.
16. Expenses. Except as otherwise specified in this Agreement, all costs
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and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses; provided, however, that the Company shall pay the fees
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and costs of Xxxx, Xxxxxx & Xxxxxxxxx relating to this Agreement and the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DIAMETRICS MEDICAL, INC.
By /s/ Xxxxxxxx X. Xxxxxxxxx
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Its Chief Financial Officer
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PURCHASERS:
[SIGNATURES OF PURCHASERS]
